IAS 20

IAS 20

Accounting for Government Grants and

Disclosure of Government Assistance
In April 2001 the International Accounting Standards Board adopted IAS 20 Accounting for
Government Grants and Disclosure of Government Assistance, which had originally been issued
by the International Accounting Standards Committee in April 1983.

Other Standards have made minor consequential amendments to IAS 20. They include
IFRS 13 Fair Value Measurement (issued May 2011), Presentation of Items of Other Comprehensive
Income (Amendments to IAS 1) (issued June 2011), IFRS 9 Financial Instruments (Hedge
Accounting and amendments to IFRS 9, IFRS 7 and IAS 39) (issued November 2013) and
IFRS 9 Financial Instruments (issued July 2014).

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CONTENTS
from paragraph

INTERNATIONAL ACCOUNTING STANDARD 20

ACCOUNTING FOR GOVERNMENT GRANTS AND
DISCLOSURE OF GOVERNMENT ASSISTANCE
SCOPE 1
DEFINITIONS 3
GOVERNMENT GRANTS 7
Non-monetary government grants 23
Presentation of grants related to assets 24
Presentation of grants related to income 29
Repayment of government grants 32
GOVERNMENT ASSISTANCE 34
DISCLOSURE 39
TRANSITIONAL PROVISIONS 40
EFFECTIVE DATE 41

FOR THE BASIS FOR CONCLUSIONS, SEE PART C OF THIS EDITION

BASIS FOR CONCLUSIONS

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International Accounting Standard 20 Accounting for Government Grants and Disclosure of

Government Assistance (IAS 20) is set out in paragraphs 1–48. All the paragraphs have
equal authority but retain the IASC format of the Standard when it was adopted by the
IASB. IAS 20 should be read in the context of the Basis for Conclusions, the Preface to
IFRS Standards and the Conceptual Framework for Financial Reporting. IAS 8 Accounting
Policies, Changes in Accounting Estimates and Errors provides a basis for selecting and
applying accounting policies in the absence of explicit guidance. [Refer: IAS 8 paragraphs
10–12]

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International Accounting Standard 20

Accounting for Government Grants and Disclosure of
Government Assistance1

Scope
1 This Standard shall be applied in accounting for, and in the disclosure
of, government grants and in the disclosure of other forms of government
assistance.
[Refer: SIC-10]

2 This Standard does not deal with:

(a) the special problems arising in accounting for government grants in

financial statements reflecting the effects of changing prices or in
supplementary information of a similar nature.

(b) government assistance that is provided for an entity in the form of

benefits that are available in determining taxable profit or tax loss, or
are determined or limited on the basis of income tax liability.
Examples of such benefits are income tax holidays, investment tax
credits, accelerated depreciation allowances and reduced income tax
rates.

(c) government participation in the ownership of the entity.

(d) government grants covered by IAS 41 Agriculture.

[Refer: IAS 41 paragraphs 34–38]

Definitions
3 The following terms are used in this Standard with the meanings specified:

Government refers to government, government agencies and similar bodies

whether local, national or international.

Government assistance is action by government designed to provide an

economic benefit specific to an entity or range of entities qualifying under
certain criteria. Government assistance for the purpose of this Standard
does not include benefits provided only indirectly through action affecting
general trading conditions, such as the provision of infrastructure in
development areas or the imposition of trading constraints on
competitors.

1 As part of Improvements to IFRSs issued in May 2008 the Board amended terminology used in this
Standard to be consistent with other IFRSs as follows: (a) ‘taxable income’ was amended to
‘taxable profit or tax loss’, (b) ‘recognised as income/expense’ was amended to ‘recognised in
profit or loss’, (c) ‘credited directly to shareholders’ interests/equity’ was amended to ‘recognised
outside profit or loss’, and (d) ‘revision to an accounting estimate’ was amended to ‘change in
accounting estimate’.

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Government grants are assistance by government in the form of transfers of

resources to an entity in return for past or future compliance with certain
conditions relating to the operating activities of the entity. They exclude
those forms of government assistance which cannot reasonably have a
value placed upon them and transactions with government which cannot
be distinguished from the normal trading transactions of the entity.2

Grants related to assets are government grants whose primary condition is

that an entity qualifying for them should purchase, construct or otherwise
acquire long-term assets. Subsidiary conditions may also be attached
restricting the type or location of the assets or the periods during which
they are to be acquired or held.

Grants related to income are government grants other than those related to
assets.

Forgivable loans are loans which the lender undertakes to waive repayment
of under certain prescribed conditions.E1

Fair value is the price that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market participants at
the measurement date. (See IFRS 13 Fair Value Measurement.)

E1 [IFRIC® Update, May 2016, Agenda Decision, ‘IAS 20 Accounting for Government Grants
and Disclosure of Government Assistance—Accounting for repayable cash receipts’
The Interpretations Committee received a request to clarify the accounting for cash received
from a government to help an entity finance a research and development project. More
specifically, the request asked whether the entity must recognise the cash received as a
liability (on the basis that the entity has received a forgivable loan as defined in
IAS 20 Accounting for Government Grants and Disclosure of Government Assistance) or in
profit or loss (on the basis that the entity has received a government grant as defined in
IAS 20). The cash received from the government is repayable in cash only if the entity
decides to exploit and commercialise the results of the research phase of the project. The
terms of that repayment can result in the government receiving as much as twice the
amount of the original cash proceeds if the project is successful. If the entity decides not to
exploit and commercialise the results of the research phase, the cash received is not
repayable in cash, but instead the entity must transfer to the government the rights to the
research.
The Interpretations Committee noted that, in this arrangement, the entity has obtained
financing for its research and development project. The Interpretations Committee observed
that the cash receipt described in the submission gives rise to a financial liability (applying
paragraph 20(a) of IAS 32 Financial Instruments: Presentation) because the entity can
avoid a transfer of cash only by settling a non-financial obligation (ie by transferring the
rights to the research to the government). The entity accounts for that financial liability
applying IFRS 9 Financial Instruments (IAS 39 Financial Instruments: Recognition and
Measurement).
The Interpretations Committee noted that, in the arrangement described in the submission,
the cash received from the government does not meet the definition of a forgivable loan in
IAS 20. This is because, in this arrangement, the government does not undertake to waive
repayment of the loan, but rather to require settlement in cash or by transfer of the rights to
the research.
continued...

2 See also SIC-10 Government Assistance—No Specific Relation to Operating Activities.

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...continued
The Interpretations Committee noted that, applying paragraph B5.1.1 of IFRS 9
(paragraph AG64 of IAS 39), the entity assesses at initial recognition whether part of the
cash received from the government is for something other than the financial instrument. For
example, in the fact pattern described in the submission, part of the cash received (the
difference between the cash received and the fair value of the financial liability) may
represent a government grant. If this is the case, the entity accounts for the government
grant applying IAS 20.
The Interpretations Committee noted that the requirements in IFRS Standards provide an
adequate basis to enable an entity to account for the cash received from the government.
In the light of the existing requirements in IFRS Standards, the Interpretations Committee
determined that neither an Interpretation nor an amendment to a Standard was necessary.
Consequently, the Interpretations Committee decided not to add this issue to its agenda.]

4 Government assistance takes many forms varying both in the nature of the
assistance given and in the conditions which are usually attached to it.
The purpose of the assistance may be to encourage an entity to embark on a
course of action which it would not normally have taken if the assistance was
not provided.

5 The receipt of government assistance by an entity may be significant for the

preparation of the financial statements for two reasons. Firstly, if resources
have been transferred, an appropriate method of accounting for the transfer
must be found. Secondly, it is desirable to give an indication of the extent to
which the entity has benefited from such assistance during the reporting
period. This facilitates comparison of an entity’s financial statements with
those of prior periods and with those of other entities.

6 Government grants are sometimes called by other names such as subsidies,

subventions, or premiums.

Government grants
7 Government grants, including non-monetary grants at fair value, shall not
be recognised until there is reasonable assurance that:

(a) the entity will comply with the conditions attaching to them; and

(b) the grants will be received.

8 A government grant is not recognised until there is reasonable assurance that

the entity will comply with the conditions attaching to it, and that the grant
will be received. Receipt of a grant does not of itself provide conclusive
evidence that the conditions attaching to the grant have been or will be
fulfilled.

9 The manner in which a grant is received does not affect the accounting
method to be adopted in regard to the grant. Thus a grant is accounted for in
the same manner whether it is received in cash or as a reduction of a liability
to the government.

10 A forgivable loan from government is treated as a government grant when

there is reasonable assurance that the entity will meet the terms for
forgiveness of the loan.

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10A The benefit of a government loan at a below-market rate of interest is treated

as a government grant. The loan shall be recognised and measured in
accordance with IFRS 9 Financial Instruments. The benefit of the below-market
rate of interest shall be measured as the difference between the initial
carrying value of the loan determined in accordance with IFRS 9 and the
proceeds received. The benefit is accounted for in accordance with this
Standard. The entity shall consider the conditions and obligations that have
been, or must be, met when identifying the costs for which the benefit of the
loan is intended to compensate.E2

E2 [IFRIC® Update, February 2022, Agenda Decision, IFRS 9 Financial Instruments and IAS 20
Accounting for Government Grants and Disclosure of Government Assistance—TLTRO III
Transactions’
The Committee received a request about how to account for the third programme of the
targeted longer-term refinancing operations (TLTROs) of the European Central Bank (ECB).
The TLTROs link the amount a participating bank can borrow and the interest rate the bank
pays on each tranche of the operation to the volume and amount of loans it makes to non-
financial corporations and households.
The request asks:
a. whether TLTRO III tranches represent loans with a below-market interest rate and, if so,
whether the borrowing bank is required to apply IFRS 9 or IAS 20 to account for the
benefit of the below-market interest rate;
b. if the bank applies IAS 20 to account for the benefit of the below-market interest rate:
i. how it assesses in which period(s) it recognises that benefit; and
ii. whether, for the purpose of presentation, the bank adds the benefit to the carrying
amount of the TLTRO III liability;
c. how the bank calculates the applicable effective interest rate;
d. whether the bank applies paragraph B5.4.6 of IFRS 9 to account for changes in
estimated cash flows resulting from the revised assessment of whether the conditions
attached to the liability have been met; and
e. how the bank accounts for changes in cash flows related to the prior period that result
from the bank’s lending behaviour or from changes the ECB makes to the TLTRO III
conditions.
Applying the requirements in IFRS Accounting Standards
The Committee observed that IFRS 9 is the starting point for the borrowing bank to decide
how to account for TLTRO III transactions because each financial liability arising from the
bank’s participation in a TLTRO III tranche is within the scope of IFRS 9. The bank:
a. assesses whether it would separate any embedded derivatives from the host contract as
required by paragraph 4.3.3 of IFRS 9;
b. initially recognises and measures the financial liability, which includes determining the
fair value of the financial liability, accounting for any difference between the fair value
and the transaction price and calculating the effective interest rate; and
c. subsequently measures the financial liability, which includes accounting for changes in
the estimates of expected cash flows.
…
continued...

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...continued

Initial recognition and measurement of the financial liability

Applying paragraph 5.1.1 of IFRS 9, at initial recognition a bank measures each TLTRO III
tranche at fair value plus or minus transaction costs, if the financial liability is not
measured at fair value through profit or loss. A bank therefore measures the fair value of the
liability using the assumptions that market participants would use when pricing the financial
liability as required by IFRS 13 Fair Value Measurement. The fair value of a financial
liability at initial recognition is normally the transaction price—that is, the fair value of the
consideration received (paragraphs B5.1.1 and B5.1.2A of IFRS 9). If the fair value at initial
recognition differs from the transaction price, paragraph B5.1.1 requires a bank to
determine whether a part of the consideration received is for something other than the
financial liability.
The Committee observed that determining whether an interest rate is a below-market rate
requires judgement based on the specific facts and circumstances of the relevant financial
liability. A difference between the fair value of a financial liability at initial recognition and
the transaction price might indicate that the interest rate on the financial liability is a below-
market rate.
If a bank determines that the fair value of a TLTRO III tranche at initial recognition differs
from the transaction price and that the consideration received is for only the financial
liability, the bank applies paragraph B5.1.2A of IFRS 9 to account for that difference.
If a bank determines that the fair value of a TLTRO III tranche at initial recognition differs
from the transaction price and that the consideration received is for more than just the
financial liability, the bank assesses whether that difference represents the benefit of a
government loan at a below-market rate of interest (treated as a government grant in
IAS 20). An entity assesses this difference only at initial recognition of the TLTRO III
tranche. The Committee noted that if the difference is treated as a government grant,
paragraph 10A of IAS 20 applies only to that difference. The bank applies IFRS 9 to account
for the financial liability, both on initial recognition and subsequently.
Should a portion of a TLTRO III tranche be treated as a government grant in
IAS 20?
IAS 20 defines:
a. government as referring to ‘government, government agencies and similar bodies
whether local, national or international’;
b. government grants as ‘assistance by government in the form of transfers of resources to
an entity in return for past or future compliance with certain conditions relating to the
operating activities of the entity…’; and
c. forgivable loans as ‘loans which the lender undertakes to waive repayment of under
certain prescribed conditions’.
Paragraph 10A of IAS 20 requires an entity to treat as a government grant the benefit of a
government loan at a below-market rate of interest. The benefit of the below-market rate of
interest is measured as the difference between the initial carrying amount of the loan
determined by applying IFRS 9 and the proceeds received. Paragraphs 12 and 20 of IAS 20
specify requirements for an entity to recognise government grants in profit or loss.
The Committee observed that a TLTRO III tranche would contain a portion that is treated as a
government grant in IAS 20 if the bank assesses that the ECB meets the definition of
government in paragraph 3 of IAS 20 and:
a. the interest rate charged on the TLTRO III tranche is a below-market interest rate as
referred to in paragraph 10A of IAS 20; or
b. the loan is a forgivable loan (as defined in paragraph 3 of IAS 20) to which paragraph 10
of IAS 20 applies.
continued...

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...continued
The Committee observed that making these assessments require judgement based on the
specific facts and circumstances. The Committee therefore noted that it is not in a position
to conclude on whether the TLTRO III tranches contain a benefit of a government loan at a
below-market rate of interest or a forgivable loan in the scope of IAS 20.
The Committee acknowledged that judgement may also be required to identify the related
costs for which the portion of the TLTRO III tranche that is treated as a government grant is
intended to compensate. The Committee nonetheless concluded that IAS 20 provides an
adequate basis for the bank to assess whether the TLTRO III tranches contain a portion that
is treated as a government grant in IAS 20 and, if so, how to account for that portion.
…
Disclosure
If a bank assesses that the ECB meets the definition of government in IAS 20 and that it has
received government assistance from the ECB, the bank needs to provide the information
required by paragraph 39 of IAS 20 regarding government grants and government
assistance.
Given the judgements required and the risks arising from the TLTRO III tranches, a bank
also needs to consider the requirements in paragraphs 117, 122 and 125 of IAS 1
Presentation of Financial Statements, as well as paragraphs 7, 21 and 31 of IFRS 7
Financial Instruments: Disclosures. These paragraphs require a bank to disclose
information that includes its significant accounting policies and management’s assumptions
and judgements in applying its accounting policies that have the most significant effect on
the amounts recognised in the financial statements.
Conclusion
The Committee concluded that IAS 20 provides an adequate basis for the bank to assess
whether TLTRO III tranches contain a portion that is treated as a government grant in IAS 20
and, if so, how to account for that portion.
…
For these reasons, the Committee decided not to add a standard-setting project to the work
plan.]

11 Once a government grant is recognised, any related contingent liability

[Refer: IAS 37 paragraphs 27–30] or contingent asset [Refer: IAS 37 paragraphs
31–35] is treated in accordance with IAS 37 Provisions, Contingent Liabilities and
Contingent Assets.

12 Government grants shall be recognised in profit or loss on a systematic

basis over the periods in which the entity recognises as expenses the
related costs for which the grants are intended to compensate.

13 There are two broad approaches to the accounting for government grants: the
capital approach, under which a grant is recognised outside profit or loss, and
the income approach, under which a grant is recognised in profit or loss over
one or more periods.

14 Those in support of the capital approach argue as follows:

(a) government grants are a financing device and should be dealt with as
such in the statement of financial position rather than be recognised
in profit or loss to offset the items of expense that they finance.
Because no repayment is expected, such grants should be recognised
outside profit or loss.

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(b) it is inappropriate to recognise government grants in profit or loss,

because they are not earned but represent an incentive provided by
government without related costs.

15 Arguments in support of the income approach are as follows:

(a) because government grants are receipts from a source other than
shareholders, they should not be recognised directly in equity but
should be recognised in profit or loss in appropriate periods.

(b) government grants are rarely gratuitous. The entity earns them
through compliance with their conditions and meeting the envisaged
obligations. They should therefore be recognised in profit or loss over
the periods in which the entity recognises as expenses the related costs
for which the grant is intended to compensate.

(c) because income and other taxes are expenses, it is logical to deal also
with government grants, which are an extension of fiscal policies, in
profit or loss.

16 It is fundamental to the income approach that government grants should be

recognised in profit or loss on a systematic basis over the periods in which the
entity recognises as expenses the related costs for which the grant is intended
to compensate. Recognition of government grants in profit or loss on a
receipts basis is not in accordance with the accrual accounting assumption
(see IAS 1 Presentation of Financial Statements) [Refer: IAS 1 paragraphs 25 and 26]
and would be acceptable only if no basis existed for allocating a grant to
periods other than the one in which it was received.

17 In most cases the periods over which an entity recognises the costs or
expenses related to a government grant are readily ascertainable. Thus grants
in recognition of specific expenses are recognised in profit or loss in the same
period as the relevant expenses. Similarly, grants related to depreciable assets
are usually recognised in profit or loss over the periods and in the proportions
in which depreciation expense on those assets is recognised.

18 Grants related to non-depreciable assets may also require the fulfilment of

certain obligations and would then be recognised in profit or loss over the
periods that bear the cost of meeting the obligations. As an example, a grant
of land may be conditional upon the erection of a building on the site and it
may be appropriate to recognise the grant in profit or loss over the life of the
building.

19 Grants are sometimes received as part of a package of financial or fiscal aids to

which a number of conditions are attached. In such cases, care is needed in
identifying the conditions giving rise to costs and expenses which determine
the periods over which the grant will be earned. It may be appropriate to
allocate part of a grant on one basis and part on another.

20 A government grant that becomes receivable as compensation for expenses

or losses already incurred or for the purpose of giving immediate financial
support to the entity with no future related costs shall be recognised in
profit or loss of the period in which it becomes receivable.

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21 In some circumstances, a government grant may be awarded for the purpose

of giving immediate financial support to an entity rather than as an incentive
to undertake specific expenditures. Such grants may be confined to a
particular entity and may not be available to a whole class of beneficiaries.
These circumstances may warrant recognising a grant in profit or loss of the
period in which the entity qualifies to receive it, with disclosure to ensure that
its effect is clearly understood.

22 A government grant may become receivable by an entity as compensation for

expenses or losses incurred in a previous period. Such a grant is recognised in
profit or loss of the period in which it becomes receivable, with disclosure to
ensure that its effect is clearly understood.

Non-monetary government grants

23 A government grant may take the form of a transfer of a non-monetary asset,
such as land or other resources, for the use of the entity. In these
circumstances it is usual to assess the fair value of the non-monetary asset and
to account for both grant and asset at that fair value. An alternative course
that is sometimes followed is to record both asset and grant at a nominal
amount.

Presentation of grants related to assets

24 Government grants related to assets, including non-monetary grants at fair
value, shall be presented in the statement of financial position either by
setting up the grant as deferred income or by deducting the grant in
arriving at the carrying amount of the asset.

25 Two methods of presentation in financial statements of grants (or the

appropriate portions of grants) related to assets are regarded as acceptable
alternatives.

26 One method recognises the grant as deferred income that is recognised in

profit or loss on a systematic basis over the useful life of the asset.

27 The other method deducts the grant in calculating the carrying amount of the
asset. The grant is recognised in profit or loss over the life of a depreciable
asset as a reduced depreciation expense.

28 The purchase of assets and the receipt of related grants can cause major
movements in the cash flow of an entity. For this reason and in order to show
the gross investment in assets, such movements are often disclosed as separate
items in the statement of cash flows [Refer: IAS 7] regardless of whether or not
the grant is deducted from the related asset for presentation purposes in the
statement of financial position.

Presentation of grants related to income

29 Grants related to income are presented as part of profit or loss, either
separately or under a general heading such as ‘Other income’; alternatively,
they are deducted in reporting the related expense.

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29A [Deleted]

30 Supporters of the first method claim that it is inappropriate to net income and
expense items and that separation of the grant from the expense facilitates
comparison with other expenses not affected by a grant. For the second
method it is argued that the expenses might well not have been incurred by
the entity if the grant had not been available and presentation of the expense
without offsetting the grant may therefore be misleading.

31 Both methods are regarded as acceptable for the presentation of grants related
to income. Disclosure of the grant may be necessary for a proper
understanding of the financial statements. Disclosure of the effect of the
grants on any item of income or expense which is required to be separately
disclosed is usually appropriate.

Repayment of government grants

32 A government grant that becomes repayable shall be accounted for as a
change in accounting estimate (see IAS 8 Accounting Policies, Changes in
Accounting Estimates and Errors). [Refer: IAS 8 paragraphs 32–38] Repayment of a
grant related to income shall be applied first against any unamortised
deferred credit recognised in respect of the grant. To the extent that the
repayment exceeds any such deferred credit, or when no deferred credit
exists, the repayment shall be recognised immediately in profit or loss.
Repayment of a grant related to an asset shall be recognised by increasing
the carrying amount of the asset or reducing the deferred income balance
by the amount repayable. The cumulative additional depreciation that
would have been recognised in profit or loss to date in the absence of the
grant shall be recognised immediately in profit or loss.

33 Circumstances giving rise to repayment of a grant related to an asset may

require consideration to be given to the possible impairment of the new
carrying amount of the asset.

Government assistance
34 Excluded from the definition of government grants in paragraph 3 are certain
forms of government assistance which cannot reasonably have a value placed
upon them and transactions with government which cannot be distinguished
from the normal trading transactions of the entity.

35 Examples of assistance that cannot reasonably have a value placed upon them
are free technical or marketing advice and the provision of guarantees. An
example of assistance that cannot be distinguished from the normal trading
transactions of the entity is a government procurement policy that is
responsible for a portion of the entity’s sales. The existence of the benefit
might be unquestioned but any attempt to segregate the trading activities
from government assistance could well be arbitrary.

36 The significance of the benefit in the above examples may be such that
disclosure of the nature, extent and duration of the assistance is necessary in
order that the financial statements may not be misleading.

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37 [Deleted]

38 In this Standard, government assistance does not include the provision of

infrastructure by improvement to the general transport and communication
network and the supply of improved facilities such as irrigation or water
reticulation which is available on an ongoing indeterminate basis for the
benefit of an entire local community.

Disclosure
39 The following matters shall be disclosed:

(a) the accounting policy adopted for government grants, including the
methods of presentation adopted [Refer: paragraphs 24–31] in the
financial statements;

(b) the nature and extent of government grants recognised in the

financial statements and an indication of other forms of
government assistance from which the entity has directly benefited;
and

(c) unfulfilled conditions and other contingencies attaching to

government assistance that has been recognised.

Transitional provisions
40 An entity adopting the Standard for the first time shall:

(a) comply with the disclosure requirements, where appropriate; and

(b) either:

(i) adjust its financial statements for the change in accounting

policy in accordance with IAS 8; [Refer: IAS 8 paragraphs 14–31]
or

(ii) apply the accounting provisions of the Standard only to

grants or portions of grants becoming receivable or
repayable after the effective date of the Standard.

Effective date
41 This Standard becomes operative for financial statements covering periods
beginning on or after 1 January 1984.

42 IAS 1 (as revised in 2007) amended the terminology used throughout IFRSs. In
addition it added paragraph 29A. An entity shall apply those amendments for
annual periods beginning on or after 1 January 2009. If an entity
applies IAS 1 (revised 2007) for an earlier period, the amendments shall be
applied for that earlier period.

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43 Paragraph 37 was deleted and paragraph 10A added by Improvements to IFRSs

issued in May 2008. An entity shall apply those amendments prospectively to
government loans received in periods beginning on or after 1 January 2009.
Earlier application is permitted. If an entity applies the amendments for an
earlier period it shall disclose that fact.

44 [Deleted]

45 IFRS 13, issued in May 2011, amended the definition of fair value in
paragraph 3. An entity shall apply that amendment when it applies IFRS 13.

46 Presentation of Items of Other Comprehensive Income (Amendments to IAS 1), issued

in June 2011, amended paragraph 29 and deleted paragraph 29A. An entity
shall apply those amendments when it applies IAS 1 as amended in June 2011.
[Refer: IAS 1 Basis for Conclusions paragraphs BC105A and BC105B]

47 [Deleted]

48 IFRS 9, as issued in July 2014, amended paragraph 10A and deleted

paragraphs 44 and 47. An entity shall apply those amendments when it
applies IFRS 9.

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IASB documents published to accompany

IAS 20

Accounting for Government Grants and

Disclosure of Government Assistance
The text of the unaccompanied standard, IAS 20, is contained in Part A of this edition. Its
effective date when issued was 1 January 1984. This part presents the following
document:

BASIS FOR CONCLUSIONS

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IAS 20 BC

Basis for Conclusions on

IAS 20 Accounting for Government Grants and Disclosure of
Government Assistance

This Basis for Conclusions accompanies, but is not part of, IAS 20.

BC1 This Basis for Conclusions summarises the International Accounting

Standards Board’s considerations in amending IAS 20 Accounting for Government
Grants and Disclosure of Government Assistance as part of Improvements to IFRSs
issued in May 2008.

BC2 IAS 20 was developed by the International Accounting Standards Committee

in 1983 and did not include a Basis for Conclusions. This Basis refers to the
insertion of paragraphs 10A and 43 and the deletion of paragraph 37. Those
changes require government loans with below-market rates of interest to be
recognised and measured in accordance with IAS 39 Financial Instruments:
Recognition and Measurement1 and the benefit of the reduced interest to be
accounted for using IAS 20.

Accounting for loans from government with a below-market rate

of interest
BC3 The Board identified an apparent inconsistency between the guidance in
IAS 20 and IAS 39.2 It related to the accounting for loans with a below-market
rate of interest received from a government. IAS 20 stated that no interest
should be imputed for such a loan, whereas IAS 39 required all loans to be
recognised at fair value, thus requiring interest to be imputed to loans with a
below-market rate of interest.

BC4 The Board decided to remove this inconsistency. It believed that the
imputation of interest provides more relevant information to a user of the
financial statements. Accordingly the Board amended IAS 20 to require that
loans received from a government that have a below-market rate of interest
should be recognised and measured in accordance with IAS 39. The benefit of
the government loan is measured at the inception of the loan as the difference
between the cash received and the amount at which the loan is initially
recognised in the statement of financial position. This benefit is accounted for
in accordance with IAS 20.

BC5 Noting that applying IAS 39 to loans retrospectively may require entities to
measure the fair value of loans at a past date, the Board decided that the
amendment should be applied prospectively to new loans.

1 IFRS 9 Financial Instruments replaced IAS 39. IFRS 9 applies to all items that were previously within
the scope of IAS 39. This paragraph refers to matters relevant when IAS 20 was amended in 2008.
2 IFRS 9 Financial Instruments replaced IAS 39. IFRS 9 applies to all items that were previously within
the scope of IAS 39. This paragraph refers to matters relevant when IAS 20 was amended in 2008.

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